The dollar index edged down to 101.1 on Wednesday after softer-than-expected inflation data reinforced expectations that the Federal Reserve will keep interest rates unchanged in October. The headline PCE price index rose 0.3% month-on-month, while core PCE, which excludes food and energy, increased 0.2%.
Consumer spending remained solid, with households continuing to buy vehicles, furnishings, and clothing despite elevated gasoline and other costs. Revised figures also pointed to stronger underlying growth: Q2 GDP was upgraded to an annualized 2.2% from 1.5%, and Q1 growth was revised higher as well. Hiring momentum improved in September, with US companies adding more workers and signaling that economic activity remains relatively robust.
The government’s employment report due Friday is expected to show a 90,000 increase in nonfarm payrolls, a key data point for the Fed ahead of its October 28 meeting. Despite Wednesday’s pullback, the dollar is still up more than 1.5% in September and was little changed over the third quarter.
